Towards professional‐model regulation of directors' conduct

Abstract

Purpose

The criminal courts are a singularly inappropriate tool to regulate the behaviour of directors, other than in a very limited set of circumstances. Shareholders are an inconsistent mechanism for regulating the board of companies. The aim of this paper is to look at the paradigms relating to criminal liability on directors acting in that capacity and argues that lessons could be learned from the way professional bodies regulate their members through a “fitness to practice” regime.

Design/methodology/approach

This is a conceptual paper.

Findings

One attraction of professional model regulation is that the outcomes are more versatile than in criminal proceedings where a conviction and punishment is the alternative to an acquittal. In professional disciplinary proceedings the outcome may include censure, the imposition of conditions upon the right to practice, suspension for a defined period of time and ultimately removing the right to practice. In choosing the outcome the decision maker has an obligation to take a proportionate view and would be entitled not to throw out the entrepreneurial baby with the breach of duty bathwater if that would loose to the company, and the public, skills which could be saved by lesser steps than erasure, including imposing conditions on the registrants activities.

Originality/value

Professional model proceedings may be more likely to be used than criminal prosecution and would go some significant way to restoring faith in the governance of companies in a way which adds responsibility to the power wielded by directors of large corporations.

Citation

Travers, D. (2013), "Towards professional‐model regulation of directors' conduct", International Journal of Law and Management, Vol. 55 No. 2, pp. 123-140. https://doi.org/10.1108/17542431311308458